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We all need money and lots of it. You need money to take care of several needs. You may need money to foot your student’s bills, own an apartment, buy a car, refurbish your home, buy equipment for your business, and many more.
If you do not have the necessary finances at hand, you’d need to apply for a loan from a banking institution or a certified lender in your city. There are several loans available on demand. It is essential to know about the loans before choosing them.
This article will discuss all you need to know about secured and how to go about receiving it.
What are Secured Loans?
Secured loans are loans that are influenced by collateral. The collateral used to get approved for the loan must be an item of value or a business asset. You can only qualify for a secured loan when you have an asset to use as collateral.
You can make a request for large amounts of money to make significant personal or business purchases, as long as the payments are secured with collateral. These loans are meant to protect your lender when they grant your request for a loan.
This is why the interest rates on repayment are less than unsecured loans. The collateral gives an indication that you’d be willing to repay the borrowed amount to fully own your collateral.
If you fail to pay back the borrowed sum, the lender can repossess the collateral to consolidate what you owe.
How Does Secured Loans Work?
When you apply for a secured loan, the lender will require you to present an asset of higher value as collateral. You can use secured loans to take care of your personal or business needs. You can get these loans from lenders, banks, mortgage lenders, auto dealerships, and credit unions.
Once your request for a secured loan is approved, the lender places a lien on the collateral pending when the loan is repaid with interest. While you take care of your needs with the loan, the lender can repossess the collateral if you fail to pay it back.
Thus, it is essential to review everything before applying for a secured loan.
Types of Secured Loans
There are severed secured loans available that you can apply for. Some of them include:
- Car title loans. These types of loans are secured by your car. To be approved for this type of loan, you must own your car outright. Your lender will place a lien on the pink slip or title of the car until the loan plus interest is repaid.
- Bad credit loans. As the name suggests, bad credit loans are loans you can apply for when you have a poor credit history. Lenders would require an asset of value for them to grant the request. However, you should know that the interest rates for this type of loan are usually higher than the rest.
- Mortgage loan. These loans are used to secure a home or other form of real estate. The collateral, in this case, is the financed real estate. Thus, if you fail to repay, the lender may repossess the real estate.
- Home equity lines of credit. This type of loan is secured by the equity in your home. The loans are provided as needed.
- Auto loans. This type of loan is secured by the automobile that is being bought. Thus, the lender holds the car’s title and repossesses the vehicle when the loan isn’t paid completely.
- Secured credit cards. For this type of loan, you get access to an amount of cash equal to the security deposit in your account. If you’re looking to improve your credit score, you should select this loan option.
- Life insurance loans. This type of loan allows you to borrow specific amounts of cash using a life insurance policy as collateral. In this case, you’ve got the whole of your lifetime to repay the loan with interest. You can also deduct it from the death benefit that is supposed to be paid to your kin when you die.
- Business loans. These loans are paid to you to take care of your business needs. The collateral, in this case, could be equipment, inventory, or unpaid invoices by your clients. However, some business loans could be unsecured.
What Can Be Used as a Collateral?
Submitting collateral is often dependent on the type of secured loan you want. For instance, if you apply for a car title loan, your car will be used as collateral. Other collateral you can submit to secure a loan includes:
- Stocks and bonds
- Business equipment
- Real estate
- Insurance policies
- Pieces of jewelry and similar items of value
- Certificates of deposits
What Happens When You Miss Payment on Secured Loans?
As earlier hinted, your lender can repossess the collateral if you default on your repayment. If you fail to make payments in a car title loan, the lender will take hold of your car. Thus, the collateral is relatively more valuable than the loan borrowed.
However, there are slight exceptions to this. If the collateral is lower in value and gets claimed by the lender, they can file for a deficiency judgment to recover the remaining owed amount.
Pros of Secured Loans
The pros of secured loans include:
- You will enjoy a lower interest rate
- Faster approval
- Your lender can take advantage of tax deductions on the interest payments such as a mortgage.
Cons of Secured Loans
The cons of secured loans include:
- If you default on repayments, your asset will be repossessed by the lender
- Your loan limit is directly tied to the asset submitted as collateral.
Final Thoughts
When it comes to getting finance for your personal and business needs, you can opt for secured loans – as long as you have an asset to match your request.
Here at Bunny Lender Secured Loans, we connect you with hundreds of certified lenders who will provide secured loans for your needs. You need
